On 20 April 2022, the UK government proposed a number of reforms to UK consumer law to protect consumers from certain business practices which have proliferated in recent years. These measures strive to enhance the powers of the CMA. Most significantly, these measures will empower the CMA to issue fines directly where traders breach consumer laws and fail to comply with CMA investigations into such breaches.
This follows as a result of the consultation published by the Department for Business, Energy & Industrial Strategy entitled “Reforming Competition and Consumer Policy: Driving growth and delivering competitive markets that work for consumers” containing long-awaited proposals for the reform of UK consumer protection law.
The key reforms relate to:
- Subscription traps. The government will introduce new rules to tackle subscription traps (in which traders make it difficult for consumers to exit a contract). These will include:
- a requirement on companies to provide certain information to consumers before they enter into the contract;
- introducing a specific requirement on traders to send consumers reminders before contracts roll-over (or auto-renew) onto a new term and before a free trial or low-cost introductory offer ends.
- Creating a new specific requirement for traders to ensure that consumers have a straightforward, cost-effective and timely mechanism for exiting a subscription contract.
- Fake reviews. Prohibiting companies from commissioning fake reviews or hosting consumer reviews without making reasonable and proportionate checks that they are genuine – or offering or advertising to submit, commission or facilitate fake reviews.
- Saving schemes. The government also plans to strengthen protections for consumers using “saving schemes” (such as Christmas Savings Clubs) by requiring such schemes to fully safeguard customers money by way of trust or insurance (subject to certain exceptions), and to update and simplify the regulations and protections relating to package travel.
How will consumer law be enforced?
Historically, the CMA has been unable to impose fines for breaches of consumer law. However, in a long-awaited but significant change, the government have indicated that the CMA will now be given the power to directly enforce consumer law, including new powers to fine companies up to 10% of their global annual turnover and individuals up to £300,000 for breaches of consumer law.
In addition, the government states that it will legislate to:
- Enable the CMA to decide for itself where consumer protection law has been breached. This will bring the CMA’s consumer law enforcement powers into line with its competition law enforcement powers. In particular the CMA will be empowered to:
- fine businesses for failing to comply with CMA directions and/or information requests without reasonable excuse or providing false or concealed information or destroyed information (up to 1% annual global turnover and an additional 5% daily global turnover penalty for continued non-compliance). Where an individual fails to comply, the CMA would be able to impose penalties of up to £30,000, with an additional daily penalty of up to £15,000 while non-compliance continues;
- fine businesses for breaching an undertaking or a direction imposed by the CMA without a reasonable excuse (up to 5% annual global turnover and a 5% daily global turnover penalty for continued non-compliance). Where an individual fails to comply, the CMA would be able to impose penalties of up to £150,000, with an additional daily penalty of up to £15,000 while non-compliance continues; and
- continue to use its current enforcement powers through the civil and criminal courts, where appropriate, and continue co-operating with other consumer enforcers including Local Authority Trading Standards Services (LATSS).
Comment
The change that is likely to have the widest impact is the ability for the CMA to impose fines of up to 10% of global turnover for consumer law breaches. Notably, the proposal from the UK government of 10% of global turnover for consumer law infringement is considerably higher than its counterpart in EU law, where the Enforcement and Modernisation Directive ((EU) 2019/2161) requires that member states be able to fine businesses up to at least 4% of the trader’s annual turnover in the member state(s) concerned for certain cross-border infringements.
The government has not committed to a date for introducing the necessary legislation to implement the reforms it is taking forward. However, businesses will need to monitor the progress of these reforms, and ensure they are ready for the new legislation.
How can we help?
Our specialist commercial team has considerable experience of advising a wide variety of businesses on all aspects of consumer law. For assistance with ensuring your business complies with consumer laws, please
contact our commercial team.
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